Provisional Tax?

[Wino]

Hi

I'm hoping any tax experts out there can advise me on this issue.

I recently in the last 18 months bought a new house. I have been renting out my previous house and so obviously must declare this as an additional income. I thought I would do this on my usual annual tax return, under other income and have done so for the period relevant to the tax year 2013.

Someone has told me though that I need to rather register as provisional tax payer, and submit these relevant returns every 6 months for my rental income and not do it via my normal annual return.

What is the correct way to do this?

Any help appreciated.

Cheers

 

[supersunbird]

Provisional tax on rental income confuses the hell out of me since I am operating at a slight loss. When I first registered they wanted R1000s, then a few days later they returned those R1000s. I am registered as a provisional tax payer but I just include it under my tax return and ignore the provisional tax section for now.

 

[Wino]

Provisional tax on rental income confuses the hell out of me since I am operating at a slight loss. When I first registered they wanted R1000s, then a few days later they returned those R1000s. I am registered as a provisional tax payer but I just include it under my tax return and ignore the provisional tax section for now.

I'm tempted to do the same but what is the actual legal requirement here? By declaring my extra income on my annual returns, I am still paying my due so the only reason I can see for SARS to want me to pay as a provisional tax payer is so they can collect their money every 6 months and not every 12 months.
What can they do if I simply just declare my extra income every year on my normal return?

 

[chrisc]

There is a space on the form for rental income. I think it is on pages 8 or 9 Before you even look at it, have you made a spreadsheet itemising ALL the possible expenses you can claim - maintenance, rates, water, interest on a loan, legal fees? You don't want to make a profit, but if you are running at a small loss, SARS will want to see that it is justified. They are not unreasonable, just careful

 

[Wino]

There is a space on the form for rental income. I think it is on pages 8 or 9 Before you even look at it, have you made a spreadsheet itemising ALL the possible expenses you can claim - maintenance, rates, water, interest on a loan, legal fees? You don't want to make a profit, but if you are running at a small loss, SARS will want to see that it is justified. They are not unreasonable, just careful

Thanks I've done that for this return due 22 Nov. Just wondering if I can continue declaring my rental income as an extra income on my normal return.

 

[droidx]

There is a space on the form for rental income. I think it is on pages 8 or 9 Before you even look at it, have you made a spreadsheet itemising ALL the possible expenses you can claim - maintenance, rates, water, interest on a loan, legal fees? You don't want to make a profit, but if you are running at a small loss, SARS will want to see that it is justified. They are not unreasonable, just careful

Sorry to hijack, but can legal fees be claimed as an expense or must it be added to the base cost of the property for cgt purposes?

 

[Wino]

Sorry to hijack, but can legal fees be claimed as an expense or must it be added to the base cost of the property for cgt purposes?

You mean all the legal fees involved in the purchase of a property? I think that goes toward eventual CGT calcs.

 

[Wino]

Bump!

Am I right in saying that when declaring an extra income via Provisional Tax, that you cannot deduct any costs in the first period (2015 -01 due 29 Aug 2015) and have to pay the full amount of tax, and then can only deduct your expenses when filing the second period return?

 

[MKFrost]

Bump!

Am I right in saying that when declaring an extra income via Provisional Tax, that you cannot deduct any costs in the first period (2015 -01 due 29 Aug 2015) and have to pay the full amount of tax, and then can only deduct your expenses when filing the second period return?

Never heard of this. As I have it, you use your income and expenses for the first 6 months and then project what your tax liability will be for the year and based on this you calculate your payment for end August. No way you can do that if you leave all your expenses out of the calculation.

 

[AchmatK]

Bump!

Am I right in saying that when declaring an extra income via Provisional Tax, that you cannot deduct any costs in the first period (2015 -01 due 29 Aug 2015) and have to pay the full amount of tax, and then can only deduct your expenses when filing the second period return?

Incorrect. Provisional tax you need to declare what your annual TAXABLE income will be to within 90% accuracy. This will include all income from all sources and all allowable deductions.

 

[Wino]

Never heard of this. As I have it, you use your income and expenses for the first 6 months and then project what your tax liability will be for the year and based on this you calculate your payment for end August. No way you can do that if you leave all your expenses out of the calculation.

I just spoke to a consultant at SARS and this is the info he gave me, though he didnt sound convinced. It doesnt make sense because small Prov tax payers wont be able to survive if they can only claim deductions in the second period.

 

[Wino]

Incorrect. Provisional tax you need to declare what your annual TAXABLE income will be to within 90% accuracy. This will include all income from all sources and all allowable deductions.

Thanks

So would this be correct:

In the Turnover line - Here I would enter my expected incoming rental turnover for the 12 month period from 1 March 2014 to 28 Feb 2015.

In the Estimated Taxable Income line - Here I would enter my turnover from above, less all estimated expenses for the same 12 month period.

The system would then generate my expected tax for the year, and the tax for this period of 6 months, which I would be due to pay by end August?